There are lots of different ways to look at income, but the long and short of it is that you want to build up multiple income streams to not only build wealth but also security in what can be a volatile economy.
Just so you know, this post may contain affiliate links. Meaning I receive commissions for purchases made through those links, at no cost to you. Please understand that I have experience with all of these companies, and I recommend them because they are helpful and useful, not because of the small commissions I make if you decide to buy something. You can read my disclosure policy for more info.
This is especially important when you are working for yourself. While typical 9-5ers might have 2-3 streams of income (their job, a retirement account, and a side hustle), the self-employed often have and need more. They don’t just have one line of work or client that earns their income. Now whether you want to consider each client, a different income stream is up to you, however, I prefer to view different services as diverse income streams.
For example, while I am a freelance writer, I don’t just write blog posts, I also write sales copy, and email broadcasts. As an experienced blogger, I also offer blog coaching and work on growing more passive income, by implementing affiliate marketing and ads.
Sign up to join the community and receive my daily tips via email. Community members get access to exclusive discounts and freebies like Contract Review Checklist - Use it to make sure you don't miss anything important when reviewing a contract.
Beyond selling services and ad space on your website, you might also consider creating and selling a digital product, while you need to market the product it can sell at any time actively and you can sell endless copies. This could be a course, ebook, printables, worksheets, planners, tutorials.
Before moving on, I’m going to take a quick second to explain the difference between active and passive income.
Active income is when you are to a certain extent trading your time for money. For example, if I don’t have a client and article to write then I’m not getting paid. I get paid for the work I do and how much I earn depends on how much work I do.
Passive income, on the other hand, doesn’t require direct action and isn’t limited base on how much you work. An easy example would be interest earned on investment or savings account. You didn’t have to do anything, but you still earned money.
Keep in mind that there aren’t many income streams that are truly passive, most require at least a little bit of action, though the amount of work still doesn’t correlate to a limited amount you can earn. For example, you could create a digital product, and a sales funnel that helps it to sell on autopilot it's now earning money with minimal action required of you. However, you had to put in the work (actively) to create the product and sales funnel.
The more income streams, the better, but not to the point you are running yourself ragged. Millionaires typically have at least seven different income streams. But no one goes from having one income stream and then the next day having seven. It takes time to build up seven income streams.
You may find that for your goals, four or five income streams is enough, or you may want more than seven. There is no one right answer for how many income streams you should have; the best answer is that you should have multiple income streams.
So how does one get to, for example, seven, income stream? You build up one at a time. You start with one, once it’s well on its way (though you’ll always monitor it), you start on a second. Then you work up to a third income stream and so on.
There are a few different reasons you would avoid creating multiple income streams at once, first and foremost you can easily spread yourself too thin. Next thing you know, instead of multiple income streams you are left with half-finished projects left and right that earn nothing.
Second, building an income stream is a learning experience, by focusing on one at a time you can apply what you learn and have better success and likely faster with the next income stream you build.
The more income streams you have, the more secure your finances are and thus the more secure your lifestyle. However, having multiple income streams doesn’t happen overnight, you have to build them one at a time, even if they will eventually lead to passive income.
Best Money Management Tool
I use the QuickBooks Self Employed (BTW you'll get 50% off with my link) app to calculate my quarterly taxes so I know how much to set aside.
Though keep in mind it only keeps up with federal taxes and you will need to set aside an additional amount for your state taxes. Click here to get started with QuickBooks Self-Employed.
Elizabeth Stapleton is the founder and voice behind Less Debt More Wine and ElizabethStapleton.com. She is a Pinterest marketer, online entrepreneur, and recovering attorney whose writing has been featured on Entrepreneur.com, The Huffington Post, The Penny Hoarder, Budgets Are Sexy, Credit Sesame, and Magnify Money. Additionally, she has been quoted in articles on Business Insider, Student Loan Hero, and Nerd Wallet.